Ralph Lauren-SEC, Web Sales Tax, German Banks: Compliance

Ralph Lauren Corp., the retailer of its namesake brand clothing, will pay about $1.6 million to resolve U.S. regulatory and criminal claims that a subsidiary paid bribes to officials in Argentina from 2005 to 2009.

The apparel company reported violations of the Foreign Corrupt Practices Act to regulators after discovering it in a 2010 internal review, the Securities and Exchange Commission said yesterday in a statement. New York-based Ralph Lauren signed a non-prosecution agreement to settle the cases.

Ralph Lauren agreed to pay $593,000 in disgorgement and $141,845.79 in prejudgment interest, the SEC said. The company will pay an $882,000 penalty in parallel criminal proceedings by the U.S. Justice Department, the SEC said.

Ralph Lauren’s subsidiary RLC Argentina used a so-called customs broker to funnel about $568,000 in bribes to ensure the clearance of prohibited goods, avoid inspections and to import certain items without the necessary paperwork, the SEC said.

To disguise the illegal payments, the customs broker submitted invoices with phony claims for expenses, according to the agreement. In addition to the bribes, RLC Argentina’s general manager directly provided or authorized improper gifts to government officials.

Under the criminal accord, the Justice Department won’t bring charges as long as Ralph Lauren cooperates with an ongoing investigation, implements certain compliance measures and makes periodic reports.

The company discovered the violations after disseminating a new FCPA compliance policy in February 2010, the SEC said. Later that year, RLC Argentina employees reviewed the policy and raised concerns about the customs broker’s work. Within two weeks of uncovering the payments and gifts, RLC reported its preliminary findings to both the SEC and Justice Department.

“Ralph Lauren did all the right things in this situation: we investigated, reported, cooperated with authorities, conducted a worldwide assessment and implemented a series of remedial measures,” Tom Hanusik, the company’s attorney at Crowell & Moring LLP, said in an interview. “The unprecedented use of non-prosecution agreements by both agencies reflects that.”

Compliance Policy

EU Lawmaker Says Draft Deal Reached on Bail-In Rules

European Parliament lawmakers reached a draft agreement on rules for imposing forced writedowns on failing banks’ creditors, Gunnar Hoekmark, the lead legislator working on the dossier told reporters in Brussels today.

He said “major political groups” in the assembly approved a tentative accord on the law.

The plans, which must be negotiated with national governments, would exempt unsecured debt with maturity of under a month and deposits of as much as 100,000 euros from writedowns, and grant a preferential treatment to uninsured depositors, Hoekmark said.

Fed Rule on Overseas Bank Units May Spark Reprisal, EU Says

The European Union intensified its campaign against U.S. Federal Reserve proposals to toughen oversight of bank units belonging to overseas lenders, warning of “potential retaliation” against the plans.

Michel Barnier, the EU’s financial services chief, last week sent a three-page critique of the draft measures to Fed Chairman Ben Bernanke, saying that they risk driving up costs at EU-based banks, leaving them at a competitive disadvantage. The move follows a meeting this month between Barnier and U.S. Treasury Secretary Jacob J. Lew, where the Frenchman pressed for a change of course.

The proposals are “a radical departure from the existing U.S. policy,” and may undermine efforts to ensure that large banks can be safely wound down if they fail, Barnier wrote in his April 18 letter to Bernanke, obtained by Bloomberg News.

Under the draft Fed plans, published in December, foreign lenders would be forced to organize their U.S. subsidiaries under a locally regulated holding company, with its own reserves of capital and easy-to-sell assets that could be tapped in crises. Bernanke has said the measure is important for the stability of interconnected, large financial institutions.

The Fed proposals shouldn’t apply to banks that are already subject to rigorous regulation in the country where their headquarters are based, according to Barnier’s letter.

Banks would be required to comply with the new Fed rules if they have consolidated assets of $50 billion, with U.S. subsidiaries accounting for $10 billion.

Transaction Tax Risk in Web Sales Bill, Finance Lobby Says

A U.S. Senate bill that would let states impose sales taxes on purchases from out-of-state sellers could lead to state-level financial transaction taxes, a Wall Street trade association said.

The bill could cause unexpected costs to be passed on to consumers of financial services, including sales taxes on services or state-level stock transaction taxes, Ken Bentsen, acting president and chief executive officer of the Securities Industry and Financial Markets Association, said in a statement released yesterday.

Professional services and financial products typically aren’t taxed by states. Under the bill, states could expand their sales tax bases and may have an incentive to look at products and services predominantly purchased from out-of-state sellers.

They would have to apply the same tax to intrastate transactions. The bill removes one barrier because it allows cross-state transactions to be taxed.

Senators supported the concept of the legislation in a non-binding 75-24 vote last month. The bill, S. 743, was set to have its first procedural vote yesterday.

EBay Inc. opposes the bill.

U.K. Proposes Regulator to Cut Pub Companies’ Tenant Income

The U.K. proposed a new regulator for companies that own more than 500 pubs, aiming to ease what officials called abuses by the owners, who may see annual income from their tenants cut by 100 million pounds ($152 million).

The pub companies affected would be Enterprise Inns Plc, Punch Taverns Plc, Greene King Plc, Admiral Taverns Group Holdings Ltd., Heineken NV, Marston’s Plc, Wellington Pub Co., Trust Inns Ltd. and Spirit Pub Co., according to a statement yesterday by the Department for Business.

Of the U.K.’s 50,000 pubs, almost half are required to buy beer from their owner under their lease, rather than on the open market, according to the statement. The new rules would prevent pub companies from requiring tenants to sell certain types of beers, often at high prices. The proposed Pub Code Adjudicator will decide on complaints of unfair rents or high prices.

German Banks Blast Merkel Plan to Split Off Proprietary Trading

Germany’s banks criticized plans by Chancellor Angela Merkel’s government to force them to separate some investment-banking operations from units that work for corporate and retail clients.

The coalition’s proposal will raise costs and erode the ability of banks to provide clients with a complete array of services, Deutsche Kreditwirtschaft, a lobby for Germany’s five biggest banking groups, said in a statement drafted for a parliamentary hearing on the bill that took place in Berlin yesterday. The “go-it-alone” approach leapfrogs that of some European partners and won’t reduce risk at banks, according to the 27-page study of the bill posted on the lower-house website.

The government legislation seeks to preserve Germany’s so-called universal banking model of investment- and retail-banking arms under one roof by watering down plans suggested by a group commissioned by the European Union and led by Bank of Finland Governor Erkki Liikanen. The central banker suggested a split to protect depositors and taxpayers in case securities units ran up losses.

Merkel’s Cabinet approved a draft bill in February that would force deposit-taking banks to split into separately capitalized units the trading they do for their own profit along with lending and guarantees to hedge funds.

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Compliance Action

U.K. Terrorist Lost Thousands on Currency Trades for Foiled Plot

From a suburban house in the central English city of Birmingham, Rahin Ahmed traded dollars and euros to raise money for what prosecutors said could have been the biggest terrorist attack on U.K. soil.

Over four weeks in 2011, his group’s plan to use backpacks to plant bombs around the country fell apart as he lost 62 percent of his 14,550 pounds ($22,000) on small-volume currency trades.

Ahmed, 26, will be sentenced to as much as life in prison this week in London after pleading guilty to terror-related offenses in August. Eleven men have either admitted or been found guilty of a range of terror offenses in connection with the planned attacks, West Midlands Police said on its website.

Ahmed’s dabbling in complex financial trading, which included ill-thought-out forays into currency, oil and U.K. and U.S. stocks, shows the difficulty of monitoring the money raised through stock trades, bank transfers or fake charities.

U.K. courts are grappling with terrorist cases as U.S. authorities deal with the aftermath of the Boston Marathon bombings, which left three people dead last week.

The Ahmed incident is the first case of its kind in the U.K. involving financial markets, West Midlands Police said.

Ahmed, a university graduate, made the trades by applying for an account at Forex Capital Markets Ltd. by over-inflating his experience, annual income and net worth.

FXCM, the London-based unit of FXCM Inc., hasn’t been accused of any wrongdoing, police said. The company cooperated with the authorities and provided information as requested, Brendan Callan, chief executive officer of FXCM Europe in London, said in an e-mailed statement.

After getting the trading account posing as an economics graduate with earnings of 99,000 pounds a year, he lost most of his money and the trust of his accomplices and was eventually cast adrift from the group, prosecutors said in court filings.

Keeping a terrorist network running can be a costly business, while the cost of the terror act itself is relatively small compared to any damage, according to a 2008 report from the Financial Action Task Force, an inter-governmental body that sets the benchmarks for effective implementation of measures to combat money laundering and terrorist financing.

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Trading Lift Seen Buoying Banks as Economies Diverge, Fed Easing

Currency trading is showing signs of rebounding after years of decline as diverging economies stoke volatility and boost the potential for profits in the world’s largest financial market.

Daily foreign-exchange volume through interdealer broker ICAP Plc, futures-exchange operator CME Group Inc. and Thomson Reuters Corp. averaged about $387 billion last quarter, 14 percent more than in 2012, according to data compiled by Bloomberg. Currency-trading revenue at the world’s 10 biggest investment banks dropped 22 percent last year to about $7 billion, according to industry analytics firm Coalition Ltd.

While no central repository of trading data exists, the jump in volumes underscores rising interest in currencies as economies decouple. The U.S. is recovering as the Federal Reserve injects cash into the economy by purchasing bonds in a policy known as quantitative easing. The euro region is in recession, the U.K. is flirting with economic contraction and Japan is stepping up its fight against deflation.

The Bank for International Settlements in Basel, Switzerland, said in its last triennial survey in 2010 that global trading volumes had risen about 20 percent to $4 trillion a day. Since then, periodic updates have shown the number to be mostly the same or lower, with jumps to $5 trillion at times.

Funds that specialize in currencies enjoyed their best start to a year in at least a decade.

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BOE’s Tucker Discusses Regulation of Financial Markets

Bank of England Deputy Governor Paul Tucker spoke about regulation of global financial markets.

Tucker spoke in New York.

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Gensler Raises Renewed Doubt Over Libor Integrity as Benchmark

U.S. Commodity Futures Trading Commission Chairman Gary Gensler raised fresh doubt about Libor’s integrity as a market benchmark, saying banks’ reported borrowing costs remain distorted.

On 85 percent of occasions in 2012, the 18 firms that contribute to dollar Libor left the rate at which they said they could borrow in the interbank market unchanged, even as the cost of insuring their debt against default using credit-default swaps soared, Gensler, 55, said in remarks prepared for a speech at the City Week conference in London yesterday.

Gensler noted that the banks said they could continue to borrow at “exactly the same rate” for four to five months despite uncertainties driven by elections and economics.

He is among global regulators leading a push to base market benchmarks such as the London interbank offered rate on data from actual trades after an investigation by U.S. and U.K. regulators uncovered widespread attempts by banks to rig Libor for profit. Royal Bank of Scotland Group Plc, UBS AG, and Barclays Plc have been fined more than $2.5 billion and at least a dozen more firms are still under investigation.

“It’s best that we not fall prey to accepting that Libor or any benchmark is ‘too big to replace,’” he said.

Alternatives to Libor include the overnight swaps rate and the short-term collateralized financing rates such as general collateral repo rates, Gensler said.

Banker Compensation Is ‘Coming Down,’ Brad Hintz Says

Brad Hintz, an analyst at Sanford C. Bernstein & Co., talked about bank earnings and the outlook for capital requirements and compensation in the financial industry.

He spoke with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television’s “Surveillance.” Michael Shaoul, chairman and chief executive officer of Marketfield Asset Management, also spoke.

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European Transaction Tax Plan Could Harm Growth, Frieden Says

The proposed tax on financial transactions in Europe risks harming growth, Luc Frieden, Luxembourg’s finance minister said at a conference in London yesterday.

“If you don’t take into account cross-border impacts then you harm growth,” Frieden said.

Frieden also said he is “very sympathetic” to a legal challenge made by the U.K. against the tax proposal.

Levitt Says SEC Chief Mary Jo White Has Broad Contacts

Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, says SEC Chairman Mary Jo White has the broad list of contacts that will help in the selection of a top staff. Levitt talked with Bloomberg’s Tom Keene and Michael McKee on Bloomberg Radio’s “Bloomberg Surveillance.”

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Comings and Goings

Canellos And Ceresney Named Co-Chiefs of SEC Enforcement

George Canellos and Andrew Ceresney have been named co-directors of enforcement at the U.S. Securities and Exchange Commission, the agency said yesterday.

Canellos has been acting director since January following the departure of Robert Khuzami, who held the post for the previous four years. Ceresney, a former prosecutor, has been a partner at law firm Debevoise & Plimpton LLP in New York.

The two men will lead the enforcement unit as it shifts from investigations tied to the 2008 credit crisis toward areas such as high-frequency trading and accounting fraud. Canellos, 48, and Ceresney, 41, both previously worked as federal prosecutors for SEC Chairman Mary Jo White when she was U.S. Attorney for the Southern District of New York.

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